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Fiat Chrysler Automobiles NV with French automaker Groupe PSA took one more step toward joining forces to become one of the largest automakers in the world.

The automakers said Wednesday their boards unanimously approved a binding agreement that allows the companies to move forward with the goal of Fiat Chrysler's late CEO, Sergio Marchionne, to combine with another major automaker.

The merger still must obtain regulatory and shareholder approval; the process is expected to take 12 to 15 months. A name for the combined company has not been announced.

"FCA has long felt smart combinations, mergers in our industry not only are beneficial, but as we approach some of the challenges in the future, are also necessary," Fiat Chrysler CEO Mike Manley said Wednesday. "We have been very vocal on this point. I believe that this — of all of the opportunities out there for us that we've had time to fully explore — is absolutely the right thing."

MORE: Alliance of FCA, union leaders fueled decade of corruption

The transatlantic combination valued at roughly $50 billion would create the world's third-largest automaker based on $189 billion revenues in 2018 and fourth-largest based on the production of 8.7 million cars — putting it behind Toyota Motor Corp., Volkswagen and the Renault-Nissan alliance. The tie-up could help provide the entities the scale to compete in an electric and self-driving future.

The agreement notches one additional step in merger talks than Fiat Chrysler had gotten with French automaker Renault SA earlier this year. Fiat Chrysler revoked its proposal after the combination failed to get the support of Renault alliance partner Nissan Motor Co. Ltd. or the French government, which holds a 15% stake in Renault. Although the French government owns about 12% of PSA and has board representation, its investment bank irrevocably has committed to vote in favor of the transaction.

Further details provided Wednesday do appear to address other concerned parties. PSA says it will buy back some of Dongfeng Motor Corp.'s 12% stake in the automaker down to 4.5%. The Chinese automaker has been a concern for the Trump administration, which said it intended to review the proposed merger.

The merged company would be Dutch-domiciled and retain major operations in Auburn Hills, Paris and Turin, Italy. Its stock would be listed on exchanges in Milan, New York and Paris.

The combination promises the continuation of all brands and no plant closures or manufacturing job losses as a direct result of the transactions, executives said Wednesday. They, however, were hesitant to say whether PSA brands like Peugeot and Citroën soon would reappear in the U.S. market — a 10-year goal PSA established in 2016. The French company's technology and next-generation platforms in the near term would be more likely, Manley said.

"That increases choice and improves overall fleet performance from a CO2 level," he said.

Shareholders of Fiat Chrysler and PSA holding company Peugeot SA would split ownership of the merged company 50-50, but PSA would appoint an effective board majority. Its CEO, Carlos Tavares, would continue to lead the company for at least five years and hold a board seat. PSA would nominate an additional five members to the 11-person board, including its vice chairman and senior independent director.

Tavares, 61, previously worked under Carlos Ghosn, the former Nissan-Renault alliance chairman. He turned around the ailing PSA when he took over in 2014 and General Motors Co.'s struggling Opel and Vauxhall brands when PSA acquired them in 2017.

"This is a big, big opportunity for all of us," Tavares said Wednesday. "The two companies are complementary — complementary in geography, in technology. They have a strong track record in implementing turnaround plans. This is a merger between two healthy companies."

John Elkann, scion of Fiat's founding Agnelli family and its current chairman, would chair the combined corporation and sit alongside four other Fiat Chrysler appointees. Manley would serve in a senior executive role.

The companies expect they would save annually $4.1 billion from combining investments in vehicle platforms, powertrains and technology.  Two platforms — one for small vehicles, the other for compacts and midsize vehicles — are expected to account for about two-thirds of production of the new company. The convergence of the companies' platforms could be seen in as little as 20 months, the executives said.

Redundancies in marketing, logistics, information technology and other areas are expected to represent 20% of the savings. Achieving synergies is forecasted to cost $3.1 billion.

Although plant closures are not expected because of the merger, experts predict because of overlap in the European markets, there may be more than 10,000 excess employees, according to the Center for Automotive Research at the University of Duisburg-Essen in Germany. Biggest overcapacities, however, are in design and engineering.

"PSA boss Carlos Tavares here is very tough with his requirements," Ferdinand Dudenhöffer, a professor of automotive economics at the German university, said in an email. "Engineers and floor workers in Europe are the losers, the shareholders the winners."

The companies expect their convergence would realize some of the highest margins based on Fiat Chrysler's strengths in North America and Latin America, and PSA's in Europe. Revenues are expected to derive 46% from Europe and 43% from North America versus the current majorities they represent for PSA and FCA respectively.

"This will help minimize the effects of any cyclical downturns in a specific region," Manley said.

But the combination does remain weak in China, where neither FCA nor PSA have a strong footing. That might be fine for now with the Chinese market contracting, but Tavares said it will be a point of focus for the company once the merger closes.

Importantly for Fiat Chrysler, which has fallen behind on electric powertrain development, PSA already is producing electric vehicles at mass scale. Merging would help Fiat Chrysler avoid hefty fines that could come from missing carbon-emissions regulations in the coming years in Europe.

"This is representative of a general trend towards consolidation and/or cooperation in the sector as it undergoes the transformation that the changeover to electric vehicles is bringing," Jonathan Branton, head of competition at London-based legal firm DWF, said in a statement. "This is presenting unique challenges that seem set to make this and other projects which bring previously independent players together for different purposes (e.g. R&D) somewhat inevitable."

The combination would entangle PSA in a racketeering lawsuit filed by General Motors Co., which claims a bribery scheme between Fiat Chrysler and the United Auto Workers orchestrated by Marchionne harmed the Detroit automaker. Fiat Chrysler has called the claims "groundless" and a reaction to its proposed merger, which GM denies.

But Tavares fully backed Fiat Chrysler on the matter: "We have done our due diligence and came to the conclusion we fully support the FCA statement that this claim is meritless."

UAW Vice President Cindy Estrada, director of the union's FCA Department, emphasized the significance of the North America market and that there is a minimal product overlap between the companies here.

“There are many challenges in the auto industry today and we hope that this will bring opportunities for growth that will benefit UAW members and our communities,” Estrada said. “We look forward to hearing more details in the future and working together to continue to make FCA a success and bring about job security for our members.”

Most of PSA's trade unions in Europe have been supportive of the combination. Only France-based CGT cast an unfavorable opinion during a works council meeting last month. German metalworking union IG Metall abstained.

PSA would allocate its 46% stake in auto supplier Faurecia to its stockholders. Fiat Chrysler would distribute a $6.1 billion dividend to shareholders, but wait to sell its Comau robotics business until the merger is complete, a change from an original statement on the intention to merge in October. Shareholders of both companies then would benefit from a potential sale after Peugeot shares dropped over concerns Fiat Chrysler investors were getting a better deal because of a value difference between Comau and Faurecia.

Peugeot shares in Paris closed up 1.4% Wednesday. Fiat Chrysler's were down 0.5% Wednesday afternoon in New York while other market indexes were up.

"We had a view and went through the normal process of due diligence to finalize the view that we felt was fair and reasonable to both sets of shareholders," Manley said. "I think we ended up in the right place."

bnoble@detroitnews.com

Twitter: @BreanaCNoble

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